Markets Do Not Select For a Liquidity Preference as Behavior Towards Risk

Thorsten Hens and Klaus Reiner Schenk-Hoppé ()

No iewwp139, IEW - Working Papers from Institute for Empirical Research in Economics - IEW

Abstract: Tobin (1958) has argued that in the face of potential capital losses on bonds it is reasonable to hold cash as a means to transfer wealth over time. It is shown that this assertion cannot be sustained taking into account the evolution of wealth of cash holders versus non cash holders. Cash holders will be driven out of the market in the long run by traders who only use a (risky) long-lived asset to transfer wealth.

Keywords: demand for money; portfolio theory; evolutionary finance (search for similar items in EconPapers)
JEL-codes: G11 E41 D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn
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Related works:
Working Paper: Markets Do Not Select For a Liquidity Preference as Behavior Towards Risk (2002)
Journal Article: Markets do not select for a liquidity preference as behavior towards risk (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:zur:iewwpx:139

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